China on mend, U.S. factory data encouraging

Fri Dec 14, 2012 11:55am EST
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By Steven C. Johnson and Jonathan Cable

NEW YORK/LONDON (Reuters) - China's vast manufacturing sector grew in December and U.S. factories had their best month since April, surveys showed on Friday, adding to hopes that the world's top two economies were on the mend.

Solid growth from the United States and China will be crucial to reviving the world economy in 2013, particularly with the euro zone likely sliding deeper into recession.

While an index of euro zone manufacturing and service sector activity rose to a nine-month high, it still showed contraction in both areas. That's consistent with the 17-country euro zone shrinking by 0.5 percent in the fourth quarter.

The HSBC flash PMI showed China's manufacturing sector expanded in December at its fastest pace in 14 months as new orders and employment rose, adding to evidence of a pickup in the economy that helped to boost market sentiment.

The data was "a further sign that the Chinese economy is already starting to recover," said Nikolaus Keis at UniCredit.

In the United States, financial information firm Markit said its manufacturing index showed the sector grew at its quickest pace in eight months as demand from domestic and foreign customers increased.

Stronger manufacturing output should help bolster a U.S. economy that has seen slow but steady improvement in employment and consumer spending and signs of life in the housing market.

"People are always hoping for good news from the United States and China, as both economies are the main drivers of global economic activity," said Tom Porcelli, chief U.S. economist at RBC Capital Markets.   Continued...

A worker smashes limestone inside a limestone mine in Quzhou, Zhejiang province October 12, 2012. REUTERS/Stringer